Lahore, October 25, 2021 (PPI-OT):Din Energy Limited is setting up a 50MW wind power plant “Din Energy Limited” in Jhampir, District Thatta, Sindh. The required commercial operations date as defined in Tariff determined by NEPRA, is fifteen months from the construction start date and till August’21, the construction of the project is ~61% completed. Din Energy is awarded upfront tariff, with the payments to be received from CPPA-G backed by the sovereign guarantee. Hydrochina International Engineering Company Limited and Hangzhou Huachen Electric Power Control Company are the EPC contractors, comfort is drawn that they have vast experience in wind power technology.
So far, owners have injected 90% of equity which lends support to achieve timely completion. In case of delay in achieving the COD, the EPC contractors will be liable to pay the liquidated damages of $ 28,500 per day backed by irrevocable bank guarantee of 15% of EPC cost. The construction contractor will be the O and M operator for two years after COD; it will provide the warranty bond (10% of EPC cost) in the form of irrevocable bank guarantee for 24 months after COD. These bank guarantees provide additional cushion for the sustainable financial risk profile.
Further, the company maintains the Debt Service Reserve Account (DSRA), which is 100% filled by 6 months SBLCs, in total providing coverage of six months on its financial obligations till maturity. Project revenues and cash flows are exposed to wind risk, there is seasonal variation in the wind speed which affect the electricity generation, and ultimately cash flows may face seasonality. However, historical wind speeds provide comfort that Din Energy would be able to meet the benchmark capacity factor and generate enough cash flows to keep its financial risk manageable.
The Company has signed Energy Purchase Agreement (“EPA”) with CPPA-G, as per the EPA, in case of non-project missed volumes the power purchaser shall be liable to pay the missed volumes calculated using tariff rates. The Company has insurance coverage to cover for the risk of business interruptions, marine and erection etc. Furthermore, external factors such as any adverse changes in the regulatory framework or prolonged delay in achieving COD may impact the ratings, which the management is confident to achieve, keeping in consideration the progress of project. Upholding financial discipline is also a consideration.
For more information, contact:
Analyst,
The Pakistan Credit Rating Agency Limited (PACRA)
Awami Complex, FB1, Usman Block New Garden Town,
Lahore, Pakistan
Tel: +92-42-5869504-6
Fax: +92-42-5830425
Email: hammad.rashid@pacra.com
Website: www.pacra.com